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It might be relatively easy to forecast the weather, but it’s harder to predict the cost.

“Since 2009, we’ve just seen year after year of broken records and very large catastrophes,” says Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR) in Toronto. “You just never know what a year is going to bring.”

Worldwide trends could give an indication: by July 2016, natural disaster losses had already reached US$30 billion, exceeding the 2015 levels by 54 per cent, according to the Aon Benfield Global Catastrophe Recap: First Half of 2016 report. Canadian losses are on a similar track, says Carolyn Rennie, managing director of Catastrophe Indices and Quantification Inc. (CatIQ Inc.), pointing to an estimate of “near or over” $5 billion in insured cat losses for year-end. Over time, “this would equate to over $16 billion in insured losses due to catastrophes over the last nine years.”

Industry partners, hoping to reverse that trend by honing risk planning and recovery efforts, have already made inroads on several fronts. So have insurers, watchful for what might come next.

Their efforts may vary, but the question is the same: Are they ready?

Forewarned, forearmed

In Alberta, hazard season usually begins in late March. That’s when the spring thaw can lead to flooding, or when fire can easily spread through trees after a dry winter.

If current forecasts—predicting a colder, snowier winter season—come to pass, the province could see active flooding as well as wildfires next spring, says Scott Long, executive director of the Alberta Emergency Management Agency.

Given the province’s recent experience with natural catastrophes, some trepidation might be expected, but Long takes a positive view: “We’re fairly confident with the mitigation work we’ve done that those key areas won’t be of concern in 2017. We’ve had a huge focus on preparedness.”

Though wildfire losses in Alberta set new records this year, the fallout could have been “a whole lot worse,” Long notes. There, emergency preparedness was bolstered by mitigation programs that include the province’s online community emergency management program, which lets communities assess local risks and plan for them with government templates. The program also allows the AEMA to “check their work” and walk them through revisions.

“That leverages technology to provide communities with better preparedness, a good emergency management plan and good risk management,” Long says. That foundation, together with an emergency information-sharing program (the Alberta Disaster Land Network) based on the one used in New York City, dry-run emergency management exercises and an expanded recovery task force, have helped sharpen the province’s response, he says.

Further west, work is underway to create an earthquake early warning system in British Columbia that would give residents a 60- to 90-second window to take cover. The system, slated to launch next year, will help commercial insurers as well as residents, says McGillivray. “That 60 to 90 seconds will be enough time to shut down pipelines, stop rail traffic and initiate critical procedures that could mitigate or prevent a large commercial lawsuit.”

The province has also adjusted building codes to address earthquake risk, he adds.

“We’re keeping a close eye on how those changes are making their way into daily practice and whether other jurisdictions, like Ontario or Quebec, will take them up.”

In Ontario, where floods have been a consistent cat story, better flood mapping has gone a long way in improving readiness, according to a recent Canadian Council of Insurance Regulators (CCIR) report, Natural Catastrophes and Property Insurance, that highlights the value of more up-to-date river flow and rainfall estimates that measure the risk more accurately. Building codes and municipal efforts are also helping to bolster planning in the province, with incentive plans to encourage better wastewater handling in cities like Kitchener and Mississauga.

Innovation vs. inaction

But readiness levels still vary from place to place and risk to risk, notes Glenn Cooper, Aviva Canada spokesperson. “There’s a lot going on, but also a lot of gaps.”

Among them: the quake corridor running between Eastern Ontario and Quebec. While the CCIR report notes a 5 to 15 per cent chance of a quake in the area, a continued lack of awareness and low uptake of earthquake coverage compounds the risk. And, the state of local infrastructure looms even larger, McGillivray notes, because of the state of repair.

Infrastructure might be out of insurers’ hands, but they can improve earthquake coverage, according to Steve Cohen, senior vice-president, pricing and underwriting, at Aviva Canada. “We need more flexibility in our product, we need to make sure customers understand it. We need to simplify it, and give them options [for] lower deductibles or different limits. It’s a lot of work for the industry.”

Other sticking points stem from the nature of some cats, like wildfires, which are harder to predict. Wildfire risk doesn’t have the same kind of risk modelling precision as water-related losses, he notes. “The industry hasn’t gotten their modelling together.”

That’s likely to change with more focused attention. Rennie points to an upcoming CatIQ Canadian Catastrophe Conference session that will bring together insurers and reinsurers to talk about risk management on that front.

While water loss has received considerable scrutiny, certain flood zones still fly somewhat under the radar—Rennie cites parts of Quebec, along with Windsor, Ont., and notes that coverage still isn’t consistent across the country. “Fire is easy—it’s covered,” she says. “The answer isn’t so simple with flood.”

Another overarching problem—no matter the peril— comes from property and homeowner attitudes, says McGillivray. “Homeowners are still too passive,” he says, noting that those living in high-risk areas often don’t make any effort to stave off damage, even if they’ve been affected by flood, fire or wind in the past. “[They think] if the basement floods, it’s the city’s problem. If the forest burns down, it’s not their fault. [They] have to realize that they play an important role in disaster risk reduction.”

“Change the mentality”

Insurers are taking on awareness and attitudes on two fronts. The first is focused on products. At Intact Insurance, overland water coverage and updated sewer-back up products that emerged in the past year and a half will likely see some updates in the Maritimes and expansions in Quebec to include condos and vacation homes, notes Darren Godfrey, the company’s senior vice-president, personal lines.

In general, the company has been able to fine-tune exposures through geo-coding—“it gives us a high level of accuracy, not just in terms of pricing, but who we offer it to,” he says.

Companies are also making a push toward incentives: Intact has worked incentives for backflow valves and sump pumps into its water loss products. Aviva gives its WeatherAssure policyholders in certain provinces an incentive to use weather-resistant roofing, and extends $1,000 to those who’ve had a water loss to make flood-minded home improvements, Cohen notes. “We’re trying to change the mentality. We’re trying to move from protection to prevention.”

Prevention 101

Consumer education is a crucial element in that shift—not only can brokers drive home the value of homeowner action, but they can also revisit limits with commercial clients, Cohen points out.

“Somebody might say, ‘I already have enough insurance’, [but] if it’s only a marginal increase [in premiums], most people will be receptive.”

Godfrey stresses the need for Prevention 101 lessons, pointing to tools like the company’s Insuranceisus.com online resource for advice on easy preventive measures for homes and vehicles. “We’ve been pushing this for a couple of years as the level of catastrophes has risen,” he says.

That kind of foresight will pay off, predicts Long, who puts great stock in the long view. While rebuilding is still ongoing in Fort McMurray, his agency’s attention is fixed firmly ahead, he says. “Fort McMurray is in the rear-view mirror. We’re one day closer to the next event.”